A Cloud Computing Startup Research report was recently published by Crozdesk’s that states that the public cloud market is expected to grow by 20% and the Software-as-a Service (SaaS) market is anticipated to increase 22% in 2018.

Crozdesk’s “” report covers: size, growth, trends and geographical information that companies can use to make better decisions when buying software and vendors can leverage to build better SaaS solutions.

Cloud Computing Startup Research – Cloud Market Adoption

Market adoption of horizontal SaaS markets is advanced and these markets are becoming more competitive. The next phase of evolution for the SaaS markets is for vendors to focus on creating even more granular vertical solutions for very specific use cases to propel growth.

Cloud adoption continues to grow as laggard technology adopters (enterprises and traditional businesses) are increasingly embracing public and hybrid cloud services, in an attempt to remain competitive.

Proof that the SaaS market has entered the last stage of market adoption are:

the sector has started to mature and stabilize over the past two decades

of the Fortune Global 50 companies, 48 have publicly announced new cloud adoption plans

Cloud Computing Startup Research – Cloud Market Revenue

Cloud IT market revenue (excluding advertising) is expected to increase from $129B in 2016 to $260B by the end of 2020 and that represents a compound annual growth rate (CAGR) of 19%. From 2015 – 2022, the global SaaS market is expected to expand at a CAGR of 20%. The is forecast for the SaaS market is $71B in 2018 – and that represents a 22% increase from 2017.

Cloud Computing Startup Research – SaaS Funding

Year-to-date funding for SaaS and enterprise software investment in Q1 to Q3 2017 was approximately $50B in total – this represents a 4.1% increase over funding raised over the same period in 2016.

Accounting and Finance SaaS software companies received the most funding over this time period, about $5B. In 2016, it was only the fourth highest funded sub-sector in 2016.

Over $3B of funding was poured into SaaS Business Intelligence, Analytics and Performance companies – this was the was the second highest funded sub-sector and was propelled by Machine Learning (ML) and Artificial Intelligence (AI) technologies.

$1.6B of funding went to Video related products primarily driven by Augmented and Virtual Reality

Funding for traditional growth segments such as CRM and Project Management have dropped substantially due to lower growth opportunities and market saturation. This can be traced to increased dominance exhibited by established market leaders – usually market share of 50% or greater.

Over 60% of the companies receiving funding worldwide were located in North America:

US: 60%

Canada 3%

Europe 22%

Within the US:

Silicon Valley and it’s surrounding area accounted for 16%

New York at 6%

Southern California 5%

Boston 4%

London 4%

Cloud Computing Startup Research – SaaS Solutions

The aggressive historical growth rates of the horizontal SaaS markets are expected to slow (increasing at a decreasing rate) in 2018 as the largest market segments as 2 large markets are well penetrated: customer relationship management (CRM) and human resource management (HRM). Growth for the SaaS market is expected to come from increased demand for specialized, industry specific solutions that will drive further fragmentation in each vertical and increase the overall size of the market.

One size-fits-all software solutions are taking a back seat to modular, vertical solutions, and this trend will be gain momentum as SMEs drive SaaS market growth in 2018. SaaS providers are increasingly focusing on niche industries and markets. With respect to mission-critical functionality, customers demand a deep level of expertise in their specific market so turnkey, industry specific solutions often lead to greater market success.

Cloud Computing Startup Research – Retention & Margins

SaaS retention and margins continue to be accurate predictor of whether a SaaS company is successful. While some customer attrition is expected in a SaaS model, high growth SaaS vendors retained 89% of their subscriptions annually, on average. The median annual churn in 2016 was 10% but in 2017 churn increased to 11%. Median gross margins on subscription revenue were approximately 77%.

About Peter

Peter is a strategic and visionary marketing executive and brand champion who has leveraged his unique combination of classical training and entrepreneurial experience at start-ups and F500 companies to transform technology innovations into multimillion-dollar revenue streams. His experience spans all areas of marketing, including go-to-market strategy and execution; brand identity and brand positioning; product development; sales and marketing leadership; customer acquisition and retention; and influencer and analyst relations. Peter consults with c-level executives, teaches at USF’s EMBA program and serves as an advisor to start-ups.

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About After 25 years of Marketing with F500 and startups, Peter formed Four Quadrant, LLC in 2004 so he could work with as many CEOs, GMs, VPS and VPMs as possible. The focus has always been to provide more experience than what an organization thought they needed to ensure that considerable value was delivered with each engagement, with the shortest ramp and the most efficient spend.